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Fronts in Canada set up to ship banned goods abroad: secret cable

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Fred Lum/The Globe and Mail

Hundreds of Iranian, Chinese and other foreign citizens have set up front companies in Canada to export banned equipment to their homelands, a Canadian official once told a U.S. envoy.

The remarks, described in a leaked State Department cable from 2008, indicate that tough sanctions against rival and rogue states – including new export controls against Iran announced this week – may prove difficult for Canada's national-security agencies to enforce.

The secret cable was written by a U.S. embassy official and obtained by WikiLeaks. It shows that Frank Ruggiero, a senior State Department official specializing in political and military affairs, came to Ottawa three years ago to press security agencies to jail foreigners in Canada who were suspected of illegally sending sensitive technology back home.

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He heard from several Canadian officials – including Bob Paulson, now RCMP Commissioner – that the problem was under control. But when pressed, they said such cases were often difficult, and at times impossible, to push through courts. Because of this, authorities said, they often preferred to levy fines or to mine such suspects for their "intelligence value."

The cable says that an export-controls chief with the Canada Border Services Agency painted an especially bleak picture.

"George Webb struck a discordant note, telling … Ruggiero that his (Webb's) hands were full targeting hundreds of mostly Iranian and Chinese foreigners and 'lots of Canadian dual-nationals' involved in 'non-legitimate businesses.' They create front companies for the purpose of procuring defense technologies," the cable reads.

Mr. Webb is said to have complained that "when CBSA agents arrest perpetrators, judges let them out on bail and they simply disappear" and that "Canadian Judges do not appreciate the seriousness of these crimes."

Officials of the Canadian Security Intelligence Service and the RCMP gave broad reassurances they were working together to ensure "that Canada does not become a staging ground for threats to the U.S. and other allies."

Yet there were acknowledged difficulties. While intelligence officials said they routinely pass files to the RCMP for criminal investigation, the Mounties say the material is often not strong enough to support criminal prosecutions.

"The RCMP, like its U.S. law enforcement counterparts, faces challenges when it uses intelligence products to make criminal cases," explained Commissioner Paulson, who was then a chief superintendant in charge of national-security programs.

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According to the cable, when he was pressed whether the RCMP had ever prosecuted an export violation case, "Commissioner Paulson said he was unaware of any, and explained that the 'greater good' was often achieved by other means."

One year after the meeting, an Iranian-Canadian named Mahmoud Yadegari was convicted of acquiring 10 transducers for reshipment to Iran. The transducers, typically used for heating and cooling in medical machinery, could also be used for uranium-enriching centrifuges.

During testimony about Iranian issues before a parliamentary committee last month, officials with the RCMP, the CSIS and CBSA again pointed to equipment seizures – and not criminal convictions – as the Canadian benchmark for success in stopping illegal exports of sensitive technology. "Prosecution and successful conviction is a good deterrent, but it is not the only possible success," one official said.

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About the Author
National security reporter

Focusing on Canadian matters during the past decade, Colin Freeze has reported extensively on the interplay between government, police, spy services, and the judiciary. Colin has twice been to Afghanistan to be embedded with the Canadian military. More

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